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Budget Gimmicks in the CRomnibus Bill

The eagerly awaited $1.1 trillion "CRomnibus" bill was released yesterday, and given its far-reaching nature, many aspects are being scrutinized. From a spending and debt standpoint, the bill wasn't expected to make many waves since discretionary spending levels were already set by the Murray-Ryan agreement last year. On a positive note, the bill includes 11 of 12 full-year appropriations bills which avoid a government shutdown and make real decisions about how the government allocates its resources. Unfortunately, it also includes a number of gimmicks that violate the spirit of budget enforcement. So far, we've found about $30 billion of transgressions.

Hidden Revenue Losses and Spending Increases

The bill violates pay-as-you-go (PAYGO) principles by increasing spending and reducing revenue by what looks like roughly $3.5 billion. The largest provision, $1.4 billion, comes from a fix to exempt expatriates from the requirement to buy health insurance. A bill which allows financially-troubled defined-benefit pension plans to reduce benefits to stay solvent costs $1.1 billion – that reduces Pension Benefit Guaranty Corporation spending upfront, which goes back into extending its solvency, but reduces federal revenue from lost taxation of pension benefits. The final $1 billion comes from various other mandatory spending increases included in the bill. The CRomnibus explicitly exempts the revenue reductions from PAYGO rules which would otherwise require these reductions to be offset.

War Spending as a Slush Fund

The bill effectively circumvents the discretionary spending caps by shifting some funds from the defense budget to the uncapped war spending category (known as OCO). The Administration's FY 2015 request of $71.4 billion should have set the bar for war spending, and appropriators even cut more than $4 billion from two initiatives in the request. Instead of using this $67 billion total, lawmakers increased war spending to $73.7 billion, nearly $7 billion above what otherwise would have been the case. Congress provided $3 billion more than requested for operations and maintenance accounts, effectively funding non-war O&M accounts through the war budget. The bill also gave $1.7 billion more than requested for the OCO portion of Migrant and Refugee Assistance, actually funding that category in OCO at a level higher than the State Department's entire request. Overall, it is unclear exactly how much shifting of non-war spending into OCO occurred, but it is clear that some did take place.

Fake "CHIMPs" Savings

Currently, savings from changes in mandatory programs ("CHIMPs") can be used to offset increases above spending caps, a practice that is reasonable in theory but unfortunately is abused through the use of phony mandatory savings. In fact, the bill includes nearly $20 billion (the exact number is difficult to calculate) of alleged cuts to mandatory budget authority that will produce no actual savings. About half of this amount comes from cuts in budget authority that don’t translate into outlay savings – for example there are over $6 billion of cuts to Children's Health Insurance Program funds that will never actually be spent. The other half comes from shifting budget authority from this year into next year – for example, the bill delays spending of funds from the Crime Victims Fund by a year and takes all the credit for the FY2015 savings. The bill does include some legitimate CHIMPs savings, but these gimmicks have become all too common in the appropriations process.

Spending Cap Wiggle Room

The bill also includes an obscure provision that would allow the Office of Management and Budget to increase the spending caps by up to 0.2 percent ($2 billion) if OMB has differences in estimates with the Congressional Budget Office. This is in essence a backstop to prevent a violation of the spending caps if OMB estimates lower Federal Housing Administration receipts than CBO. Those receipts count as negative spending against the cap, so if that estimate gets revised down, spending would automatically rise. Without this provision, OMB would have to sequester a small percentage of spending to bring it back down to the cap level. This isn't a totally egregious gimmick, but it allows spending to be higher than it otherwise would be.

Gimmicks in the CRomnibus Bill

Gimmick

Deficit Increase

Ex-Pat Mandate Fix

~$1 billion

Defined-Benefit Pension Change

~$1 billion

Mandatory Spending Increases

~$1 billion

War Spending Overrun

~$7 billion

CHIMPs Cuts With No Savings

~$10 billion

CHIMPs Shifting Spending

~$10 billion

FHA Wiggle Room

~$2 billion

Total

~$30 billion

Source: CBO, OMB, rough CRFB calculations. Numbers do not equal total due to rounding.

It is a good sign that lawmakers have done almost all the appropriations bills, making key policy decisions rather than just continuing the government on autopilot. Getting these bills done on time to avoid a shutdown shows a return to a more normal budget process. But the CRomnibus shows that lawmakers continue to game or ignore budget enforcement.